May 2007 | Commentary | Carriers Corner

Transportation as Corporate Change Agent

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For many years, transportation was considered the backwater of the business world. Over the last decade, however, forward-thinking companies have identified transportation as a driving force for change. As a result, they realized increased profits and improved customer service throughout the supply chain.

Wal-Mart, for example, uses its distribution savvy to dominate the retail field—and has been doing so for more than one decade. But what about other companies, those that may not have the internal resources or expertise to utilize transportation as a change agent for their business?

Seeking Outside Help

Many companies in this situation outsource transportation functions to secure the expertise, resources, and, most importantly, the mandate for change.

One upstate New York corrugated manufacturer, for example, replaced its local trucking company with a dedicated contract carrier to help reduce transportation costs and improve customer service. The dedicated carrier brought with it a "Platform for Continuous Improvement"—a developed methodology of tracking metrics, analyzing data, and setting goals.

The carrier's ability to manage on-time delivery exceptions, customer delivery delays, and the all-important metric of manufactured-square-feet (MSF) per load, was integral to the partnership's success.

The manufacturer scheduled routine operating meetings with its support team and on-site carrier manager to review the continuous improvement platform. After examining basic solutions such as revised routing, and advanced strategies including altered delivery times to relieve chronic and documented delays, the team devised action plans for improvement.

As a result, the company changed how and when it manufactures product. It also improved the transportation department's standing in the eyes of the operations and sales teams.

The transportation team is no longer told who and when to deliver product to; instead, the department works with customer service representatives and operations managers to plan its manufacturing schedule, leading to improved delivery times and volumes.

Overall, the manufacturer reduced its cost per MSF by 12 percent, and increased the MSF per load each year by an average of 16 percent. In addition, customer service ratings are now at their highest level ever.

Let's look at another example of a company using transportation as a business change agent.

A Sweet Deal

On the New England coast, a world-famous chocolate company facing seasonal volume demands employed multiple less-than-truckload (LTL) carriers to move its products throughout the year and during busy season.

To better handle its peak deliveries and obtain a stable force of drivers throughout the year, the chocolatier changed its strategy and built a relationship with a dedicated contract carrier.

Thanks to the new partnership, the company is able to augment its dedicated driver group with additional drivers and temperature-controlled equipment to handle peak shipping demands.

The dedicated carrier brought several benefits to the relationship, including key performance indicator (KPI) reports, which the chocolate maker did not receive from its LTL carriers. KPIs benefit the carrier and the manufacturer by allowing both parties to accurately forecast seasonal demand peaks as well as track and ensure that all orders are delivered on time.

The partnership also enables the company to tie chocolate deliveries to the pre-delivery of display kiosks at its seasonal outlets. These efficient transport practices enabled the chocolate company to reduce transportation costs, quickly deploy its products, and increase sales volume.

Thinking Outside the Box

A box manufacturer located in the Philadelphia suburbs boasts a similar success story. After moving its operations to a larger building to accommodate growth, service and cost issues surfaced.

The company realized it needed to improve its transportation system—the local carrier it used was failing under the additional freight volume and new logistics needs.

Once the company repaired that link in the supply chain, it became apparent that manufacturing and customer service operations were also in trouble.

To address these issues, the manufacturer replaced its local carrier with a dedicated carrier empowered to manage the shipping process as well as the entire shipping area. The dedicated carrier took responsibility for tracking deliveries, setting delivery appointments, and directing load building to maximize trailer cube.

In addition, at regular operating meetings, the dedicated carrier provided tracking data, as well as plans for increasing load volumes and better utilizing transport assets—drivers and equipment.

These changes helped reduce transportation costs and improve customer service. The box company's transportation group became a defacto change agent, helping the manufacturing and customer service departments follow its lead and enact improvements. Ultimately, the company recovered from the move and increased its bottom line.

These examples illustrate how effective transport practices can anoint a transportation department the change agent for the rest of its company. Empowered transportation management only occurs after transportation has proven itself capable of leading.

Whether a company handles transportation in-house or outsources the function to a third party, certain consistent factors—data tracking, reporting, and action—must always be included.

Transportation departments that employ a platform allowing them to track, report, and take action based on data to continuously improve results will receive recognition from executive management, drive company success, and function as change agents for the enterprise.

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